The Supreme Court heard oral argument on February 28, 2012 in Kiobel v. Royal Dutch Petroleum Co., a case raising the controversial issue of corporate liability for alleged violations of international law.

Kiobel is a putative class action in which the plaintiffs, current and former residents of Nigeria, allege that three oil companies aided and abetted the Nigerian government in committing human rights violations in connection with oil exploration activities in Nigeria. Plaintiffs invoked the Alien Tort Statute (“ATS”), 28 U.S.C. § 1350, as the jurisdictional basis for their U.S. lawsuit against foreign companies for alleged human rights abuses occurring in Africa. The ATS, although passed by the first Congress in 1789, was first utilized in 1980 by an alien plaintiff seeking a civil remedy for alleged human rights abuses. The ATS provides as follows: “The district courts shall have original jurisdiction of any civil action by an alien for a tort only, committed in violation of the law of nations or a treaty of the United States.”

The Second Circuit dismissed the plaintiffs’ suit, holding that the district court lacked jurisdiction over plaintiffs’ claims against corporations. The court started with the uncontroversial proposition that the ATS is a jurisdictional statute and does not create any cause of action. Citing an earlier Supreme Court ATS case, Sosa v. Alvarez-Machain, 542 U.S. 692 (2004), the Second Circuit stated that it must look to “customary international law to determine both whether certain conduct leads to ATS liability and whether the scope of liability under the ATS extends to the defendant being sued.” After an extensive review of international law, the court could not identify a single instance in which a corporation had ever been subject to any form of liability under the customary international law of human rights. Thus, the court concluded that imposing liability on corporations for violations of customary international law had not attained a “discernible”, much less the required “universal”, level of acceptance among the nations of the world in their relations with each other. Therefore, the court held that it lacked subject matter jurisdiction over the plaintiffs’ claims against the oil companies and dismissed the complaint.

The Supreme Court docket has been extremely active since plaintiffs’ petition was granted in October 2011. In addition to denying defendant Shell’s conditional cross-petition for writ of certiorari, the Court has seen over 35 amici briefs filed in Kiobel, including a brief by the United States government in support of petitioners-plaintiffs and briefs by the governments of Germany, Great Britain, and the Netherlands in support of respondents.

The outside interest generated by Kiobel underscores the important ramifications of the Court’s decision on corporate liability, both for U.S. companies with foreign operations, as well as foreign and multinational firms. But the outcome of the case pivots on a relatively narrow slate of legal issues. In their merits brief, the petitioners first take the position that the Second Circuit incorrectly characterized the issue of corporate civil liability as an issue of subject matter jurisdiction. Petitioners go on to argue that under the ATS, analysis of customary international law is necessary to determine whether a particular act constitutes a violation of a substantive international law norm, but that domestic law (which undoubtedly recognizes corporate civil liability) supplies the remedy. The respondents of course disagree, pointing to the above-quoted excerpt from Sosa as clearly establishing that international law must recognize corporate liability before ATS liability can be imposed.

From the outset of petitioners’ oral argument, it was apparent that the Court was concerned about the notion of U.S. courts imposing civil liability on foreign companies for foreign conduct. Counsel for petitioners, Paul Hoffman, uttered two sentences before Justice Kennedy interjected with two statements he challenged Mr. Hoffman to rebut: (1) “International law does not recognize corporate responsibility for the alleged offenses here,” and (2) “No other nation in the world permits its court to exercise universal civil jurisdiction over alleged extraterritorial human rights abuses to which the nation has no connection”. Justice Alito followed in the same vein shortly thereafter with the observation that “there’s no particular connection between the events here and the United States,” which fed into his later questioning “what business” a case like this one has in the courts of the United States. Justice Roberts appeared equally concerned about U.S. courts adjudicating the instant dispute, and he questioned whether the Kiobel suit itself contravened international law insofar as it could not have been brought in any other nation.

While the Court kept Mr. Hoffman occupied with the issue of the extraterritorial scope of the ATS, Deputy Solicitor General Edwin S. Kneedler, arguing for the United States, was permitted to address several other arguments in support of petitioners’ position. Nevertheless, the argument turned back toward broader policy issues, as Justice Kennedy posed a hypothetical to illustrate what he perceived to be the United States’ position:

Suppose an American corporation commits human trafficking with U.S. citizens in the United States. Under your view, the U.S. corporation could be sued in any country in the world, and it would -- and that would have no international consequences. We don't look to the international consequences at all. That's -- that's the view of the Government of the United States, as I understand.

Kathleen M. Sullivan, although peppered with wide-ranging questions from an active bench, was able to consistently return focus to respondents’ position that corporate liability was simply not recognized by customary international law. Respondents’ argument was summarized succinctly by Ms. Sullivan toward the end of her oral argument:

[T]he ATS has language that says the tort must be committed in violation of the law of nations. So although, Justice Ginsburg, it doesn't specify who may be the defendants, it does point us to the law of nations to figure out what the law of nations thinks about who may be the defendants, and the law of nations is uniform. It rejects corporate liability. It rejects corporate liability.

Counsel for respondents finished her argument by clarifying that respondents did not seek a rule of “corporate impunity”, noting that corporate officers could be liable for human rights violations and that there were other avenues for suits redressing human rights violations, such as under state law or the domestic laws of nations.

In rebuttal, Mr. Hoffman argued that “international law places no restriction on the way domestic jurisdictions enforce international law”. However, despite his effort to focus the Court’s attention on domestic law as supplying the remedy for a violation of international law, he found himself answering the same line of questioning that began the argument – why should the courts of the United States entertain a “suit by an . . . alien against another alien for conduct that takes place overseas”? This fundamental question emerged as perhaps the primary theme of the oral argument. Whether the justices received a satisfactory answer will likely determine the outcome of the case. Keep an eye on the DRI Court Reporter for a summary of the Court’s decision when it is released.

The entire oral argument transcript can be downloaded from the Supreme Court website here.